Estate Tax Questions

[Terry D EA]

Decedent died two years ago with the only remaining asset being his primary residence. The family has recently sold the residence. There is an estate that is currently open. The residence has not been used for any rental activities nor have any of the beneficiaries been living in or using the residence. I am of the opinion that form 1041 with Sch D is required to be filed due to the income exceeding the 600.00 threshold. In this scenario, the estate has held the property for the last two years and assumes FMV at date of death to determine the taxable gain/loss at the time of the sale. There are three beneficiaries and the will states the proceeds are to be divided equally. Now regarding the beneficiaries, Sch K is used to distribute the net income. Because none of the beneficiaries "inherited" the property, is this a taxable event for the beneies?

[Lion EA]

If the house was still held by the estate, the sale by the estate is a taxable event on the estate 1041.

 

The beneficiaries receive their inheritance, the proceeds, divided equally.  They DO "inherit" the proceeds per the will.

[Terry D EA]

Thanks Lion and you did confirm my original thoughts. Just to be sure I am on the right track, the estate's basis is FMV at time of death for determining gain or loss correct?

[Lion EA]

Yes.  And, it was no longer a personal residence at DOD.  The estate doesn't have a residence.

[michaelmars]

have you been deducting the real estate taxes and other expenses as you would for any other investment property? or adding them to basis?

[Terry D EA]

Can't answer that one. Client of mine who asked the questions regarding the tax consequences of this sale is not the executor. I asked enough detail to determine the tax consequences. As to the final bottom line, that is yet to be determined. I have not been officialy retained to file this return. If and when I am retrained, then I'll get all of the details surrounding the sale and what has taken place since the time of death. However, thanks for the advice.